China: Foreign Pressure Didn’t Prompt Yuan Policy Shift

By Shen Hong

TORONTO—China said Saturday its recent decision to unhook the yuan from the dollar was based on the need to transform its economic growth model and not due to foreign pressure.

The comment, made by a senior central bank official on the sidelines of the Group of 20 summit in Toronto, came at a time when Beijing is widely viewed as entering the meetings as a much more relaxed and confident player, following its move on June 19 to drop its nearly two-year-long controversial currency peg, and a promise to make the yuan exchange rate more flexible.

“I think China should base its macroeconomic policy reforms on its own economic development needs as well as the international economic climate,” Zhang Tao, director general of the Chinese central bank’s international department, said at a press conference featuring senior officials from several key government ministries.

“I’m not feeling any difference in pressure on the yuan issue at this summit compared with previous G-20 summits,” Zhang said in response to a question on whether Beijing’s latest currency move has successfully prevented the thorny yuan issue from taking the center stage at the summit.

“The exchange rate reform is good for the restructuring and sustainable development of our economy,” Zhang added.

Taking care to avoid sounding inconsistent on the yuan policy theme, Yu Jianhua, director general of the department of international trade and economic affairs at the Ministry of Commerce, said while the latest currency reform—which has caused the yuan to hit a series of new highs against the dollar this week—will put pressure on Chinese exporters, “the overall impact on foreign trade is not so big.”

Nevertheless, Yu said a combination of factors, including a stronger yuan, a weaker euro and Europe’s sovereign debt crisis, makes him “not so optimistic” about China’s foreign trade performance this year.

Separately, Zhang said it is “extremely important” for the International Monetary Fund to carry out its quota reform. China hopes the organization can finalize the relevant consultation among its members before the next G-20 summit in Seoul in November.

On the issue of imposing a bank tax, a senior official from the Ministry of Finance said such a levy isn’t the only option for improving the international financial system and that China is against introducing a universal global standard on the tax.

“Our position is that it’s up to each individual country to make its own decision,” said Zheng Xiaosong, director general of the MOF’s international department. “Boosting the standards and improving the framework of financial sector oversight is the real solution,” he added.

In the sweeping press conference that addressed a wide range of issues, a senior official from China’s top economic planning agency also reiterated some of Beijing’s economic policy priorities.

The focus of China’s current macroeconomic policy remains on seeking a balance between accelerating growth, shifting the economy towards a consumption-led model and managing rising inflation expectations, said Ma Xin, director general of the department of international cooperation at the National Development and Reform Commission.

But Ma added that the government is also emphasizing making its policies more targeted and flexible.

The MOF’s Zheng also said that in order to keep supporting the still-nascent economic recovery, China remains committed to strong public spending this year and will continue with structural tax cuts.

Comments (1 of 1)

In fact, a puzzle that confused me recently is why the chinese have accumulated so many dollars instead of using some or even all to improve its people's needy lives? Comparing with European countries, which,obviously,have spent too much on social welfare to afford, China seems to be more eligible to enhance its low-level social security. However, as far as I am concerned, the chinese did nothing but purchasing the bonds issued by the actually bankrupt US government or disgraceful companies such as Freddie Mac and Fannie Mae. No matter what, could anyone give me a resonable explanation to the Chinese's unusual actions ?

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